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Prime Healthcare completes hospital purchases in Kansas City area

A few hours after gaining Kansas regulatory clearance, Prime Healthcare Services on Monday said it completed its purchase of hospitals in Kansas City, Kan., and Leavenworth.

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The 400-bed Providence Medical Center and 80-bed St. John Hospital join 23 acute-care hospitals in the California-based Prime chain.

“Prime Healthcare understands how important these acute care hospitals are to the residents of Wyandotte and Leavenworth counties and intends to help the facilities provide the high quality healthcare that they deserve,” Prime chairman and president Prem Reddy said in a prepared statement.

Prime promised the attorney general it would maintain the current hospitals and their emergency departments for at least five years and invest at least $10 million in capital and other improvement projects over that period.

Prime, a for-profit company, bought the two financially distressed hospitals from the Sisters of Charity of Leavenworth Health System, a nonprofit hospital chain based in Denver. The SCLHS system put Kansas City, Kan.-based Providence and Leavenworth-based St. John up for sale because the heavily indebted hospitals were dragging down the system’s overall financial results.

In a public hearing last week, participants said the hospitals’ cash sale price of $54.3 million fell far short of the $121 million of debt that the SCLHS system will continue to absorb after the sale.

On Monday morning, Kansas Attorney General Derek Schmidt said Prime’s commitment to ongoing charity care and to maintaining a community advisory board, once it is created, was sufficient assurance to allow the sale to proceed and he would take no action to block the sale. The attorney general’s role, under Kansas law, is to be responsible for ensuring that the sale of charitable assets to a for-profit organization “sufficiently complies with the public interest.”

He said the debt-loaded financial condition of the two hospitals and the likelihood they would close without the infusion of new capital by the new owners was a compelling reason to proceed with the sale.

Schmidt sponsored the public hearing last week in Kansas City, Kan., to hear public input about the transaction. Most people who testified wanted the sale to go forward. Concerns raised by those who opposed the sale “are addressed by the binding commitments to ongoing charitable care and community input,” he said on Monday.

He also commissioned an independent review of the transaction, which confirmed that the sale price was reasonable, that the purchaser was the highest qualified bidder and that all of the sale proceeds would be applied to the former owner’s outstanding debt leaving none for other charitable purposes.

Schmidt noted in a press release “that one person who traveled from California to testify at last week’s hearing raised concerns about some of the new owner’s billing practices and other conduct at hospitals it owns in other states.”

He said those complaints would be shared with officials who oversee medical billing by providers in Kansas, including the Medicaid Fraud Control Unit in his office.

“Kansas will, of course, expect these new owners not only to live up to their commitments in this transaction but also to diligently comply with all aspects of Kansas law in their operations here,” Schmidt said in a press release.

Prime responded on Monday afternoon to Schmidt’s statement about opposing testimony at the hearing. In its sale announcement, Prime said that the critic and fellow members of the Service Employee International Union had tried – but failed – “to sway community opinion against the transaction” with the goal of hurting Prime.

Meanwhile, a spokesman for the SCLHS system confirmed that 24 employees in “duplicative roles” have been let go.

He said the buyer and seller hold to the commitment to maintain “substantially all” of the hospitals’ workforce and that the eliminated jobs accounted for less than 1 percent of the employees.

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